The Bitcoin Halving Is Over – Greener Mining Is Coming

People usually care about price above all else when it comes to Bitcoin halving.

Instead, what they should be paying attention to is the net positive that Bitcoin can have for the future of humanity.

While Bitcoin has long been criticized for being bad for the environment, the trend towards renewable energy and mining actually shows the opposite. Yes, fossil fuels are still an important component of the Bitcoin network, but with the fresh halving behind us and the block subsidy cut in half, miners with lower operating expenses, such as renewable energy, will continue their rise.

The halving will be a catalyst for a greener, more renewable bitcoin mining movement to finally be recognized among its staunchest critics as a net positive for the environment.

Fossil fuels are the fiat of bitcoin mining

Bitcoin mining has been constantly criticized for its energy consumption and use of non-renewable energy sources. While the trend is reversing, a significant portion of bitcoin mining still relies on fossil fuels.

But why was fossil fuels relied on in the first place? Simply because fossil fuels have incredibly high energy density and are relatively stable, making them ideal as an energy carrier.

Read more from our opinion section: This Bitcoin Halving Cycle, Miners Need a New Energy Strategy

While fossil fuel plants have relatively low upfront costs to build, they require the continuous procurement of fuel, ie low capital consumption high opex. And that fuel is subject to variable prices and increasingly susceptible to shocks. With climate change taking center stage this year, and with the role played by fossil fuels, there is increased regulatory risk. Fossil fuels are essentially borrowing against the future for immediate gratification, and we the people will inevitably pay the bill for the consequences, with compound interest. This is the definition of high-time preference thinking – and it’s antithetical to Bitcoin’s philosophy.

But the good news is that there is a trend towards renewable energy and long-term, low-time preference thinking is already taking shape.

The economics of renewable energy

In addition to the environmental benefits, the shift to renewable energy sources in bitcoin mining also makes economic sense. While renewable energy has a high initial capital cost, the energy produced has a low marginal cost once installed – it costs nothing for the sun to shine or the wind to blow or the geo to heat. If there is no buyer for any given kWh, the cost of said unit of energy will go to $0. This is increasingly the case for renewable generation capacity that has yet to be connected to the grid.

What’s more, renewable energy sources such as ocean thermal, wind and solar have become increasingly cost-competitive with fossil fuels in recent years. As a result, miners using renewable energy sources can enjoy lower operating costs, making them better positioned to withstand the reduced block subsidy as we progress through the fifth period.

In addition, the use of renewable energy sources enables energy sovereignty and decentralization. While only a few nations have fossil fuel deposits, every country has access to renewable energy. This has led to massive centralization in the energy industry where a handful of super majors and state-owned oil companies exert vertical control over the entire supply chain.

Facing the long-term economy

Despite the economics favoring renewable energy over fossil fuels for the bitcoin mining industry, there are still challenges to overcome in the long term. The external costs of fossil fuel use have yet to be factored into their costs. This amounts to a government and taxpayer subsidy that artificially lowers the price today, making fossil fuel use more attractive in the short term.

What’s more, the volatility of some renewable energy sources, such as solar and wind, poses challenges for grid balancing. But in areas with significant renewable energy resources, such as Texas, bitcoin mining is gaining recognition for its ability to cycle on and off almost instantly. During times of excess production, mining facilities provide a buyer for unused energy, while during high demand the facilities are able to shut down to free up that power. This unique feature is integrated directly into the generation side, expanding renewable energy to new frontiers.

Gradually, then suddenly

As bitcoin mining continues to favor renewable energy and degas energy markets in this fifth period, it will be undeniable how powerful this one two-punch is. We will see more renewable, off-grid mining operations emerge, and we will even see historically dominant fossil fuel miners integrate renewable energy into their mix. It will likely take bitcoin mining to catalyze a new renewable energy source, such as ocean thermal, for some of the most vocal critics outside the industry to come around and see mining as a net positive. But it’s only a matter of time.

Nathaniel Harmon is the co-founder of OceanBit, a leading provider of ocean thermal energy conversion (OTEC) ushering in an era of clean baseload energy. Nate is the inventor of Demand Response OTEC, a chemical oceanographer and engineer who received his MS in Marine Geology, Geochemistry and Marine Geology and a BS in Environmental Science from the University of Hawaii, where he focused on autonomous oceanographic instrument development and microfluidic chemical engineering. Prior to founding OceanBit, Nate worked on proposals and research for the Hawaii Clean Energy Initiative and founded the Bitcoin software development and consulting firm Blockchain Solutions Hawaii.

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